Ford Motor Co, the only Detroit carmaker to avoid bankruptcy protection, says it will reduce its huge debt by another $US4 billion.

Ford Motor to repay $4bn of debt

Ford Motor Co, the only Detroit carmaker to avoid bankruptcy protection, said on Wednesday it will reduce its huge debt by another $US4 billion ($A4.72 billion) as it continues to show signs of financial strength.

The Dearborn, Michigan, carmaker will pay $US3.8 billion ($A4.5 billion) in cash to a United Auto Workers trust fund that pays retiree health care bills, and it will pay out $US255 million ($A301 million) in dividends on preferred securities that had been deferred as the carmaker worked its way through financial troubles. The company now will make quarterly payments on the securities, which are a combination of preferred stock and bonds.

Ford CEO Alan Mulally said in a statement that the payments are another sign of confidence that the company's restructuring plan is working.

"We expect to continue to improve our balance sheet as we deliver on our plan," Mulally said. "Our business results make it possible to take these actions while still accelerating the investments we are making in our business."

Ford sales are up more than 30 per cent through May, almost double the 17 per cent increase in total US car sales.

The carmaker said the actions combined with a $US3 billion ($A3.54 billion) debt payment in April will reduce its total debt to around $US27 billion ($A32 billion) from $US34 billion ($A40 billion) at the end of the first quarter.

The payments will save Ford roughly $US470 million ($A555 million) in annual interest costs, the company said.

Ford was forced to mortgage its factories and even its blue oval logo to borrow more than $US23 billion ($A27 billion) in 2006 and 2007. But the move helped it avoid bankruptcy protection, unlike Chrysler Group LLC and General Motors Corp.

Recently Ford has reported sales gains and four straight quarterly profits. It earned $US2.1 billion ($A2.48 billion) in the first quarter, helped by higher transaction prices for its cars and trucks, which have been getting high quality ratings from third-party groups such as Consumer Reports magazine and JD Power and Associates.

As the US car industry headed toward financial disaster in 2007, the UAW agreed to set up trust funds that would take on enormous health care payments for Ford, GM and Chrysler retirees. Ford made initial payments to the trust and agreed to pay roughly another $US7 billion ($A8.26 billion).

After the payments, Ford will still owe the UAW trust about $US3.6 billion ($A4.25 billion), payable over three years. The company said it intends to repay the note early but wouldn't say when.